Not another Webinar!!! ??
FUTURE OF INSURANCE SECTOR – SHOULD HEALTHCARE INSURANCE BE MANDATORY IN THE NEW NORMAL
I was on a diverse panel yesterday, debating ′FUTURE OF INSURANCE SECTOR – SHOULD HEALTHCARE INSURANCE BE MANDATORY IN THE NEW NORMAL’.
With mortality & livelihoods heavily impacted by COVID, it has added urgency & edge to a vital topic.
Moderated by the prominent & well-respected senior healthcare industry leader, Mr. Annaswamy Vaidheesh (https://www.dhirubhai.net/in/annaswamy-vaidheesh-458b4b5a/), and sponsored by RxCruit (https://www.dhirubhai.net/company/rxcircuitadvisors/), the panel comprised other senior industry figures with domain expertise in General Management, HR, Operations, Business Development & Academia.
QUESTION: The question posed to me was ‘What in your opinion are the key challenges on making Health Insurance mandatory and how can we overcome those roadblocks?’
While the full discussion is available at https://www.youtube.com/watch?reload=9&v=47Z-7QX85oI&feature=youtu.be here are my points that address the question.
CONTEXT IS KEY
The pace of developments in the Indian health insurance industry had already picked up, witness the IRDAI 2019 regulations, new FDI limits, etc. With the COVID pandemic upending normal life, my answer addresses a ‘less optimistic scenario’ while hoping for the best.
‘Mandatory’ implies a Government regulation, and it has already arrived via an announcement from the MHA on compulsory health insurance by employers.
For a bit, visualise we are in 2023 A.D... or, in 0003 A.C. (After Corona). Imagine the impact on Government, industry, individuals, society & politics.
There is no silver bullet vaccine - success is patchy, as the virus does not behave as measles but more like the flu - always morphing. There is no permanent immunity, relapses are possible.
Market access reduces with new trade barriers and political alliances. Broken supply chains are rebuilt and unit costs rise across almost every product line.
Industry contraction has led to GDP contraction, some sectoral job losses have been permanent, re-skilling has been uneven and the demographic dividend, our youth bulge, now looks very volatile.
On the demand side, animal spirits are in hibernation. People are cautious with their spending, and the rift between Dalal Street, Wall Street and Main Street has never been clearer. Discretionary spending is down.
It has forced a reckoning, it has tested limits, and hard conversations between industry & Government have separated the essentials from the accessories.
Maybe, a consensus evolved as follows:
Government should provide a basic foundation, focus on Universal Education, a Universal Basic Income for the unemployed.
Employers should focus on survival & adaptation, to provide the core essentials of employment & income.
Individuals should take personal responsibility for their choices vs requirements. e.g. for their health, they should buy insurance as per their income & need. Health and its attendant choices, whether it is your diet or your insurance, is a responsibility not a right.
In this hypothetical scenario, we contemplate the future of the health insurance sector. We are not considering absolute numbers, growth rates and market shares - rather, the underlying determinants.
SUGGESTIONS:
When we say ‘mandatory’, I believe we are automatically speaking of some form of UNIVERSAL HEALTH CARE. We then have to address the how & the who posed by such a project.
THE HOW – the challenge of the model
The 1st challenge could be the debate that I have not seen much of in our country - the single payer systems that exist elsewhere vs the mixed model or mixed-up model we have in India.
Canada and the U.K. are perhaps the most popular examples of single payer. You also have Israel, Switzerland, the USA and others as models.
While the relative simplicity & universal coverage are attractive, the downsides are ‘moral hazard’ of indiscriminate use and longer wait times for treatment.
In our country, it is further complicated by a narrow tax base – you could have the very few paying for equal levels of treatment of everyone - in a system where the demand-supply gap in medical resources is massive.
For now, perhaps, our patchwork payer system will have to do and we work with what we have.
THE WHO – who will be covered
Let us stratify the population to be covered:
The employed, the retired & the unemployed; the diseased & the healthy; the young and the old; men, women & children, transgender & hetero normative…no one is to be left out.
All of the above can be addressed by economic criteria - The wealthy, the middle class, the poor.
The wealthy can fend for themselves; the poor & low income have the PMJAY and ESIC.
The focus then is on the mid segment – those in formal employment, and those in unstructured employment and the self-employed.
FORMAL EMPLOYMENT: SME vs Large scale
Large employers can afford it – this is an arena of refinements & customer delight, a customer segment spoilt for choice, that often squeezes the health insurer + broker + TPA system.
The bulk of employers are in the SME space – a majority of their workers may be covered by the ESIC schemes. Where ESIC eligibility ends is where difficulties begin.
CHALLENGES for SMEs.
? Affordability: While a mass programme like this could be on a cost-plus basis, probably with some form of subsidy, an easier hurdle to address is the 18% tax (!!!) on premium today.
? Taxation: ITC clarifications & simplification from CBIC – expenses incurred on mandatory health insurance for employees, MHA GOI order # 40-3/2020-DM-I(A) dated 15th Apr 2020.
CHALLENGES for the self-employed and individuals.
? ADOPTION - Local language communication, with a simplification of the benefits & responsibilities.
? PURCHASE & PERSISTENCE - Affordability, persistence & renewal of premium – is there a way to subsidise?
? THE FINE PRINT - All the old issues of medical screening, exclusions, moratorium period, pricing, retention & re-pricing – IRDAI 2019 has done a great job of simplification.
THE WHO – who will cover
CHALLENGES for the insurer
? Communications - Local language communication, simplification of the benefits & responsibilities. Something like the AMFI public service advertising.
? Operations - Insure-tech scale up. Insurance app for mandatory enrolment for the 1st year, medical verification for renewal & re-pricing next year? AI, bot-chats, local language programming to help with consultative selling & enrolment.
? Distribution – for Bharat, not just India. Post & Telegraph as distributor?
? Product design & pricing for new incoming cohorts
THE WHO – MEDICAL SERVICE PROVIDERS & THEIR RANGE OF SERVICES
You bought a ticket (insurance) to the show, but what if the show (medical treatment) is poor?
It will be a challenge to ensure, nationwide, that the experience of healthcare delivery proves the expense & effort of insurance worthwhile.
CHALLENGES for medical providers
Medical providers are not just hospitals, and services are not just in-patient.
? Product mix that should be eligible for reimbursement
o Prevention or wellness: Fitness, nutrition & mental health
o Detection: Health check-ups
o Maintenance: OPD, Doctor consultations, dental & vision.
o Curative: In-patient, health & accident
o Palliative: chronic pain, end of life care, physiotherapy.
? Revenue mix - Insured numbers will shoot up, revenue mix will change, settlement systems will have to improve as the DSOs will stress the finances of medical providers.
? Reimbursement rates – greater throughput & occupancy rates should translate into lower unit costs and lower prices. However, this is not a given.
I am sure the limitations of time, the format and my knowledge have left points unaddressed. For example, more on the role of Government. Please feel free to add to the discussion with your thoughts, comments & constructive criticism.
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